I have found another harrytrader! lol

'Direction is the inefficient equalizer within the markets structure. It is what the market does to find balance or temporary efficiency. Inefficiencies are relative imbalances and the information source that causes the market to move directionally. Direction is the measure----the only measure ---of the inefficiencies within the market structure.

Trading has always been opportunity based within the price structure of markets---average prices, trends, perceived high or low prices, etc.. The opportunities are mostly separated as to classification and managed reactively to external parameters. This fragmented approach is counter to productivity in that it ignores portfolio theory. Taken together they remain the reason for the lack of trading results that have been so well documented over time.

From any starting point, direction is always one dimensional---either up or down. It is also universal in that it is in every market. Trading is finding and managing an imbalance which markets express through direction. Approaching direction as the product for trading solves many of the inherent problems faced by traders today. Trading economics calls for an imbalance to be present in the market and the market expresses this internally through direction. Direction and trading profitability are a needed fit. The issue is not fragmented throughout the spectrum of opportunity, but rather concentrated as a single focus.

The Fundamentals of Opportunity.
This calls for fitting the model of the market. As a trader, you need to mimic it's activity. The foundation of any market is it's liquidity as this allows the lowest entry/exit costs. Liquidity denotes a lot of actual interest in a market because to be present others must think there is some kind of opportunity there. [The equivalency relates to a full versus an empty gaming table]

Entry and exiting are by far the most difficult things for a trader to do well. The reason being that the execution calls for a moment [for a price] of the market's time and moments are random in nature----therefore the acknowledged difficulty. This also makes shorter term trading more difficult as over a large sample size this difficulty tends to prevail. To further complicate this beginning and ending procedure for trades is the fact that the marketplace is disadvantaged rather than advantageous. Normal trading environments call for an advantage to be successful, however those trades are mostly just between two parties where one party is usually forced to take the disadvantage due to other concerns. In a multiple participant atmosphere the same disadvantages would apply to both sides especially considering the immediacy needed for an at the market transaction. In other words, as a pre-condition for liquidity, both sides [buyer/sellers] accept a below the bar level functionality in order to secure the benefits of liquidity. Any good trade then has to overcome this before it can begin to realize it's potential. Understanding this paradox will help traders in many ways----especially with their expectations in shorter trade formats and in the amount of time used trying to find an entry advantage'.

I was always fascinated by the great winnings and losses of Victor Niederhoffer's career. So, here is a snippet of the article before his losses, but even in 1994, you can read where his position was on money management.

Financial Trader
Nov/Dec 1994
Volume One, Issue Eight, Page 18

'The Shoeless Trader'

"I believe in pinpoint-precision trading, entering and exiting at the points and times when I believe mathematical relationships exist. If the market is a few ticks away from where I want to enter, or if the spread is wider than I want, I will pass up the trade. I have to do it this way, because I have no feel for the market. We do not use stops. They are designed to make people contribute to the markets."

Vic says that money management is the least-developed part of his trading approach. "We margin about one tenth of our equity. In currencies we use an implicit margin of 2.5. Commodities move about 3/4 percent a day â enough to keep wheels of commerce going. Our equity fluctuates plus or minus 1/3 percent of capital per day."

His partner adds, "We do not believe in money management. We only try to cap our maximum position size. If commodities move 3/4 percent in a day, we try to capture 40 percent of that move."

" I figure that in my career, I made gains of $200 million. My total losses are probably $200,000 â mostly for those clients who closed out their accounts soon after opening them, after a few initial losses.

"Research is key to success, but I goes in cycles. What worked yesterday does not work today â youâve got to change your research." Vic does not sell research â good research is best kept for oneself, and poor research is not worth selling.

Victor has been collecting hourly prices in different markets since 1961. He yells, and one of his associates comes in with a large heavy black book, filled with numbers written in longhand, covering hourly prices changes in major financial market. Vicâs studies show how a change in one market is likely to impact other markets.

"Letâs say I want to find out what will happen to bonds the next day if the Japanese yen goes up today."

His associate punches a few keys, and a computer generates a printout based on Vicâs historical database. It shows what bonds have done in the past, in one hour, two hours, three hours, 24 hours and so on, after the yen has risen a hundred points. Each prediction is qualified by an array of statistical features. When Vic trades, he factors in relationships between many more markets.

"I developed this predictive program in 1981. It is based on market action during hours and days in the related markets. Recently, people have been coming out with commercial versions of this approach. Lots of these people have the technology but do no know how to use it. We have been using it for 15 years. We have the refinements nobody else has." Vic still does all his programming in QuickBasic, despite howls of protest from his staff. He says that he goes back to programming whenever he takes a big loss.

"What you see on the screen is a ruse. It prompts average Joes to provide their contributions to the system. The lowest moth has a hundred ways of deceiving for survival â why not a chart? These ruses milk people for fractional costs of trading, while maintaining the image of hope.

"To win in trading, you have to overcome the huge take that the industry pulls out of the game. There are approximately 5,000 members of various exchanges whose seats are worth about $4 billion. The NFA may take $100 million a year in fees, and brokersâ commissions easily come to $1 billion. Then the bid-ask spreads, fees, research reports -- $10 billion to $15 billion off the top of the pot. The average people who do average things are the ones who support this game. If you conform to all the customs in the markets, youâll be chipping into that $10 billion to $15 billion fund. Walking without shoes puts you into a nonconformist mood. The only way to overcome being a certain loser is to thin differently from others."

Steve Wisdom, Vicâs partner, comes into his office. "People who trade without an edge will wind up with returns reflecting slippage and costs," he says coldly. He scoffs at competitors who bet huge amounts on mechanical trading systems and names a multimillion dollar CTA who recently went belly-up. "In 10 years, they made $150 million for customers and lost $150 million." He feels sure that the rest of the mechanical-system followers will also blow out.

" I make a lot of money for a lot of people. I do something athletic every day, and the last time I saw a doctor was when I had my appendix taken out of the appendix taken out at the age of seven. Speculation is the noblest pursuit in man. If you have a good character, it will express itself in trading."

In the past few years there have only been three major long-term rallies. They began on September 17, 2001...July 24, 2002...and October 7, 2002...

On each of these dates a number of curious events occurred...

The markets opened and the indices began plunging recklessly...But by early afternoon it was if the angels had arrived...and the markets were brought back from the brink of collapse...

Each time a large unnamed buyer in the futures market secretly swept in and bought up massive quantities of S&P future contracts - making reckless bets that the S&P would go up - even though it was obvious that it was going to fall. This is a sure way to get rid of a lot money - very quickly. However, because such a large amount of money was wagered on the S&P's rise - it was actually enough to reverse the market's fate.

This simple trick was first suggested by Robert Heller - a Federal Reserve Governor - in 1989 (the year after the creation of the Plunge Protection Team). He argued that it would be an easy way to rig the markets...

The move (so far) has successfully brought the markets back each time...even so much as to completely reverse the market's fate and transform the crisis into a rally...further propping up the already way overvalued indices. The PPT Rallies: Blatant manipulation of the highest order.

On each of these dates the markets were plunging precipitously. Then a huge unnamed buyer secretly came in and bought up large amounts of S&P future contracts...reversing the market's fate and transforming the crisis into a false rally...
One of the rallies began after the September 11 terrorist attacks. The markets managed to show an astounding rise for 3 to 4 months proceeding the attacks. The U.S. media called it a "patriotic rally". The European Press (more accurately) called it a "PPT (Plunge Protection Team) rally". Another rally began on July 24, 2002 amidst the shocking news of the unprecedented corporate accounting scandals - an event that should have sent markets spiraling. The European Press again referred to it as a "PPT rally".

What's more at the Federal Open Market Committee meeting held on Jan 29-30, 2002 the Fed pondered using "unconventional methods" to stimulate the economy. Even more shocking: earlier this year the Financial Times (London) quoted a Fed official who did not want to be named as saying one of the extraordinary measures considered in January was "buying U.S. equities".

Plus a number of curiously understated articles in the popular press have also begun to acknowledge the existence of the Plunge Protection Team - and the dangerous actions its begun to engage in, including the Washington Post , Sydney Morning Herald , the Guardian (London) and the New York Post .

DON'T BELIEVE THE PLUNGE PROTECTION TEAM EXISTS?

Take a look at these tell-tale reports from the popular press...

On February 23, 1997 the Washington Post published an article
acknowledging the existence of the Plunge Protection Team. This
was the first article ever to feature a story in the mainstream
press on this secret government team.

On April 5th 2000 the New York Post online reported:
"... something happened at around 1.00pm our time yesterday that pulled the stock market back from the edge of the cliff... one
minute the NASDAQ was down 11%... and then it suddenly rallied
several hundred points in the matter of an hour". Once again -
someone started buying large amounts of stock index future
contracts through Goldman Sachs and Merrill Lynch - though
neither brokerage firm (the article admitted) would comment on
who made these purchases. The article later admitted the
existence of the Plunge Protection Team.

On October 13, 2000 The Sydney Morning Herald in an article
entitled "Angels from on high drag markets to safer ground" sited
a classic case of "divine intervention". It was Wednesday October
11th... the Dow Jones Industrial Average plunged 435 points (4.3%) and the NASDAQ plummeted 187 points (5.8%) in the first 10 minutes of trading. Then as the article stated "the angels
arrived". The market rebounded miraculously. The DOW only ended 1.7% down for the day and the NASDAQ was down just 1.32%. The next day the markets rallied. The thing is, nobody knew why.

Traders were stunned at the turnaround. What was clear is that
the reversal was engineered in the futures market. It took a lot
of heavy buying by the major Wall Street Houses to bring the
market back that day - but no one would reveal the source of the
buyers.

The Guardian reported on Sunday September 16th, 2001 - 5 days
after the September 11 terrorist attacks - "... that a secretive
committee... dubbed 'the plunge protection team'... is ready to
coordinate intervention by the Federal Reserve on an
unprecedented scale. The Fed supported by the banks, will buy
equities from mutual funds and other institutional sellers... "

A New York Post writer had a telephone conversation with a very
worried Fed official on September 17, 2001 - the day the stock
markets reopened after the terrorist attacks. They discussed how
the Fed could easily intervene in the market by purchasing stock
index future contracts - as it's an inexpensive and apparently
foolproof way of rigging the market without leaving a trace.

An article in the Financial Times on Feb 21, 2002 about Japan's
Stock Buying Body and the Plunge Protection Team commented that it was... "Arguable the PPT's motions helped quell the tides in September." They later said that "... government backed equity markets, as Japan has recently become aware, do not work... Plunge protecting the world's markets may be a hazardous pursuit" .'

Federal investigators have arrested an enigmatic Wall Street wiz on insider-trading charges, and incredibly, he claims to be a time-traveler from the year 2256!
Sources at the Security and Exchange Commission confirm that 44-year-old Andrew Carlssin offered the bizarre explanation for his uncanny success in the stock market after being led off in handcuffs on January 28.

We don't believe this guy's story, he's either a lunatic or a pathological liar, says an SEC insider.

But the fact is, with an initial investment of only $800, in two weeks time he had a portfolio valued at over $350 million. Every trade he made capitalized on unexpected business developments, which simply can't be pure luck.
The only way he could pull it off is with illegal inside information. He's going to sit in a jail cell on Rikers Island until he agrees to give up his sources.

The past year of nose-diving stock prices has left most investors crying in their beer. So when Carlssin made a flurry of 126 high-risk trades and came out the winner every time, it raised the eyebrows of Wall Street watchdogs.
If a company's stock rose due to a merger or technological breakthrough that was supposed to be secret, Mr. Carlssin somehow knew about it in advance," says the SEC source close to the hush-hush, ongoing investigation.

When investigators hauled Carlssin in for questioning, they got more than they bargained for: A mind-boggling four-hour confession.
Carlssin declared that he had traveled back in time from over 200 years in the future, when it is common knowledge that our era experienced one of the worst stock plunges in history. Yet anyone armed with knowledge of the handful of stocks destined to go through the roof could make a fortune.

It was just too tempting to resist, Carlssin allegedly said in his videotaped confession. I had planned to make it look natural, you know, lose a little here and there so it doesn't look too perfect. But I just got caught in the moment.
In a bid for leniency, Carlssin has reportedly offered to divulge "historical facts" such as the whereabouts of Osama Bin Laden and a cure for AIDS.

All he wants is to be allowed to return to the future in his "time craft." However, he refuses to reveal the location of the machine or discuss how it works, supposedly out of fear the technology could "fall into the wrong hands.
Officials are quite confident the "time-traveler's" claims are bogus. Yet the SEC source admits, No one can find any record of any Andrew Carlssin existing anywhere before December 2002.
Weekly World News will continue to follow this story as it unfolds. Keep watching for further developments'.

'What I learned losing Â£60,000 in my first year as a full-time trader'

By Malcolm Robinson

'During my first year as a local (independent trader) on
the floor of LIFFE, I bought and sold 8804 FTSE futures contracts,
about 40 contracts per day on average.

The result was a loss of Â£61,620 or -Â£267 per trading day. I was
profitable on 55% of the days with an average gain of Â£1009, my
average loosing day was -Â£1780. My biggest one day gain was Â£7730 and my biggest loss -Â£12,426 As you can probably imagine, this was a difficult time for me.

I was trying to work out how to make money consistently. It was the consistency that seemed so hard to find. As you can see I was having a regular experience of making money, what was
killing me were my losses.

It seemed that every time I got ahead by Â£5-6000 over a period of a week or two, I would lose it all and a few thousand more in the space of a couple of days.

At the time I was too unhappy with my performance to be willing to spend any time analysing my results. If I had I would have
discovered that during this period all I needed to do to go from a
loss of Â£61,620 to a small profit would have been to avoid just 10
trading days. Those 10 days cost me a total of Â£69,169!

At the end of this period I was so frustrated, fed up and stuck
that I decided to quit trading and return to a more secure career.

It only took me a few weeks to abandon this plan and return to
trading. I felt sure that I had the raw talent to become a
consistently successful trader, what I needed, I reasoned, was
some support. Support to stop me from having the huge losing days that were crippling me financially.

I approached a firm I knew that backed traders on the floor and
they agreed to back me with Â£20,000 of trading capital. We would split profits 60:40 and I was to set an initial daily loss limit
of Â£500.

If I hit my Â£500 limit the firmâs floor manager would come and
tell me to go home. The third day trading I lost about Â£3500 and
nothing happened, no one came to ask me to stop trading.

I felt very foolish, but continued to trade for the remainder of
the week while avoiding any contact with the floor manager. The
following Monday (the weekâs losses had totalled about Â£5000) I
got a message to meet with the director with whom I had made the agreement (it transpired he had been away the previous week). I was sure that he was going to say that the deal was off.
Instead, to my surprise, he told me how important it was that he
could trust me. He needed to know that when the market was volatile he could trust me not to be racking up big losses. He suggested that I start afresh. Needless to say I was both relieved and grateful.

So I went back to the trading pit that morning with the determined intention to not loose more that Â£500. The next two weeks turned out to be one of the toughest periods of my trading career and one of the most rewarding. Stopping when I
was down was hard.

I realised that what had been at the root of my large losses was my inability to accept loosing at all. To me loosing was unacceptable. Such was my intolerance for loss that I lost for ten consecutive days. But as the days progressed, even though I continued to loose Â£500 a day, I found my mood lifting.

I actually started to feel OK about loosing as long as it was within
my limit. At the end of this 10-day period of losses a seeming
miracle happened; I started to make money.

My target was to get to +Â£1000 and then not give back more than 20% of my gain. So when I had a profitable day I was making between Â£800 and Â£2000, for an average of about Â£1200. Not only did I start to make money, I did so for 15 days in a row, three entire weeks without a loss.

This marked the beginning of a new era of trading for me. In retrospect, I believe that I had been trading scared, scared that I was really a looser. The two weeks of rigidly sticking to my loss limit caused me to revaluate myself. I started to feel good about myself for sticking to my limit. Before it was bad if I lost money, now it was only bad if I lost more than my limit. Before, I never knew whether I was going to make Â£1000 or loose Â£5000; now I knew that the worst case was a loss of Â£500 and that was OK.

I started to see that sticking to my trading limits was a sign of
strength and my confidence started to rise. Looking back at my first yearâs loosing streak, if I had restricted my losing days to -Â£500 my loss of Â£61,620 would have turned into a profit of Â£83,525.

Not only that, I think that had I been sticking to a loss limit during
that period, my confidence would have been that much greater and my percentage of profitable days would also have been higher. Scared money never wins, as the saying goes, 'If we are scared what are we scared of?'

'Direction is the inefficient equalizer within the markets structure. It is what the market does to find balance or temporary efficiency. Inefficiencies are relative imbalances and the information source that causes the market to move directionally. Direction is the measure----the only measure ---of the inefficiencies within the market structure.

Trading has always been opportunity based within the price structure of markets---average prices, trends, perceived high or low prices, etc.. The opportunities are mostly separated as to classification and managed reactively to external parameters. This fragmented approach is counter to productivity in that it ignores portfolio theory. Taken together they remain the reason for the lack of trading results that have been so well documented over time.